1007-00008 · Vantage Mobility Systems Corp · Correspondence/MeridianCode

dormancy-notice-letter-vms-to-mct.docx DOCUMENT IP / Technology

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VANTAGE MOBILITY SYSTEMS CORP. 4100 Industrial Parkway Sterling Heights, MI 48312

Telephone: (586) 274-8800 Facsimile: (586) 274-8801

July 14, 2023

Via Overnight Courier and Email (delivery@meridiancode.com)

Ms. Priya Ramaswamy General Counsel & Corporate Secretary Meridian Code Technologies, Inc. 2750 Orchard Blvd., Suite 400 Santa Clara, CA 95054

Re: Formal Notice of Dormancy Under Section 9.4 of the Master Embedded Software License and Services Agreement, dated June 21, 2022, between Vantage Mobility Systems Corp. and Meridian Code Technologies, Inc.

Dear Ms. Ramaswamy:

I write in my capacity as General Counsel of Vantage Mobility Systems Corp. ("VMS" or "Vantage"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in Sterling Heights, Michigan. This letter constitutes formal written notice delivered pursuant to Section 9.4 of the Master Embedded Software License and Services Agreement (the "MESLSA" or the "Agreement"), dated as of June 21, 2022, by and between Vantage Mobility Systems Corp., as licensee, and Meridian Code Technologies, Inc. ("MeridianCode" or "MCT"), as licensor. The purpose of this letter is to invoke the dormancy provisions set forth in Section 9.4 of the Agreement and to place the license for the ATLAS-RT™ embedded real-time operating system, Version 4.2 (and subsequent minor updates thereto), in Dormancy Status, as that term is defined in the MESLSA. This letter is sent with the advice and counsel of our outside legal advisors at Calderwood & Harkness LLP, Detroit, Michigan, who have reviewed this correspondence and the applicable provisions of the Agreement in their entirety.

1. Background and Agreement Overview

As MeridianCode is aware, the MESLSA was executed by the parties and became effective as of June 21, 2022 (the "Effective Date"). Pursuant to the MESLSA, MeridianCode granted to VMS a perpetual license (subject to the initial five-year term ending June 20, 2027) to use, integrate, modify, and deploy the ATLAS-RT™ embedded real-time operating system, Version 4.2, and subsequent minor updates thereto, including without limitation Version 4.2.3 (collectively, the "Licensed Software"), on a worldwide basis. The total deal value of the MESLSA, inclusive of license fees, integration services fees, and annual maintenance and support fees over the initial term, is Twenty Million Dollars ($20,000,000).

The scope of the license permits VMS to integrate the Licensed Software into up to five (5) designated vehicle platform configurations under VMS's internal development program designated "Project Argonaut." The five originally designated platform configurations are as follows: Argonaut-A, Argonaut-B, Argonaut-C, Argonaut-D, and Argonaut-E (each, a "Platform Configuration" and, collectively, the "Platform Configurations"). The specific technical requirements, hardware specifications, and deployment parameters for each Platform Configuration are set forth in Exhibit B to the MESLSA and in the corresponding Statements of Work.

As further set forth in Section 15.8 of the MESLSA, the Agreement is governed by the laws of the State of Michigan, without regard to its conflict-of-laws principles. Disputes arising under or in connection with the Agreement are subject to binding arbitration under the rules of the Midwest Arbitration Institute, with the arbitral seat in Detroit, Michigan, as specified in Section 15.9 of the Agreement.

2. Rescoping of Project Argonaut

VMS hereby informs MeridianCode that, on March 14, 2023, the Board of Directors of Vantage Mobility Systems Corp. adopted a formal resolution (Board Resolution No. 2023-07) to rescope Project Argonaut. Pursuant to that resolution, the target vehicle platforms for Project Argonaut were reduced from five Platform Configurations (Argonaut-A through Argonaut-E) to two Platform Configurations (Argonaut-A and Argonaut-C only). The remaining three Platform Configurations — Argonaut-B, Argonaut-D, and Argonaut-E — have been removed from the active Project Argonaut scope, subject to potential future reinstatement at VMS's discretion.

The Board's rescoping decision was driven by several converging factors. First, VMS has experienced significant and continuing supply-chain delays in the procurement of specialized semiconductor components required for the embedded computing modules in the Argonaut-B, Argonaut-D, and Argonaut-E platforms. These delays, which are attributable to broader industry-wide constraints in the semiconductor supply chain, rendered the original Project Argonaut timeline infeasible for the affected platforms. Second, VMS's private equity sponsor, Kestrel Capital Partners, LP ("Ashgrove Equity Partners"), issued a portfolio-wide capital expenditure reduction directive in the first quarter of 2023, requiring all portfolio companies, including VMS, to reduce planned capital expenditures by a minimum of thirty percent (30%) for the remainder of fiscal year 2023 and into fiscal year 2024. The rescoping of Project Argonaut was a direct consequence of VMS's compliance with that directive.

Additionally, as part of a broader strategic review conducted at Ashgrove Equity Partners's direction, VMS made the decision to prioritize internal combustion engine ("ICE") platform fleet vehicles over electric vehicle ("EV") platforms in the near term. The Argonaut-B and Argonaut-E platforms were principally designed as EV-integrated platforms, and the decision to defer electrification integration to a future Phase II initiative (for which no firm date has been established) further supported the rescoping. VMS notes that this strategic prioritization is subject to change and does not represent a permanent abandonment of EV platform development.

As a direct consequence of the rescoping resolution and the factors described above, VMS suspended all active integration work on the ATLAS-RT™ Licensed Software as of March 22, 2023. Since that date, no further integration, testing, customization, or deployment activities have been undertaken by VMS or its engineering personnel with respect to the Licensed Software on any of the Platform Configurations.

3. Integration Status at Time of Suspension

At the time active integration work was suspended on March 22, 2023, the integration status of each of the five Platform Configurations was as follows:

(a) Argonaut-A: Milestone 3 of 5 completed. Alpha integration testing was passed on February 28, 2023. All deliverables through Milestone 3, including initial hardware-software interface validation and basic functional testing of the ATLAS-RT kernel on the Argonaut-A target hardware, had been accepted by VMS's engineering review board. This Platform Configuration was the most advanced of the five in terms of integration progress.

(b) Argonaut-B: Milestone 1 only completed. The requirements specification for the Argonaut-B platform integration was approved on October 3, 2022. No code integration had commenced, and no source-code customization had been initiated for this Platform Configuration as of the suspension date.

(c) Argonaut-C: Milestone 2 of 5 completed. Source-code customization specific to the Argonaut-C platform architecture was delivered by MeridianCode on January 15, 2023, and was accepted by VMS's engineering team. Integration testing had not yet commenced for this Platform Configuration.

(d) Argonaut-D: Not commenced. No work of any kind had been initiated on the Argonaut-D Platform Configuration as of the suspension date.

(e) Argonaut-E: Not commenced. No work of any kind had been initiated on the Argonaut-E Platform Configuration as of the suspension date.

VMS's internal engineering teams had invested approximately 14,200 person-hours across the Project Argonaut integration effort as of the suspension date. These hours represent a substantial investment of VMS's engineering resources and institutional knowledge.

With respect to fees paid to MeridianCode as of the date of this letter, the following amounts have been remitted:

The remaining integration services fees for Milestones 4 and 5 total $1,280,000, none of which has been earned or invoiced as of the date of this letter.

4. Invocation of Section 9.4 Dormancy Provisions

Section 9.4 of the MESLSA provides, in relevant part, that if the licensee suspends active integration of the Licensed Software for more than one hundred twenty (120) consecutive days without providing written notice to the licensor, the licensor may, at its election, convert the license to "Dormancy Status." Section 9.4 further provides that the licensee may, by timely written notice delivered prior to the expiration of the 120-day period, affirmatively elect to invoke Dormancy Status on its own initiative.

As set forth in Section 2 above, VMS suspended all active integration work on the Licensed Software on March 22, 2023. Accordingly, the 120-day consecutive suspension period prescribed by Section 9.4 will expire on July 20, 2023.

This letter is being delivered to MeridianCode on July 14, 2023 — six (6) calendar days prior to the expiration of the 120-day period. This letter therefore constitutes timely written notice of VMS's suspension of active integration and of VMS's affirmative election to invoke Dormancy Status under Section 9.4 of the MESLSA. VMS is not in default of the 120-day notice requirement, and this notice is fully compliant with the timing and procedural requirements of Section 9.4.

VMS requests that Dormancy Status take effect as of July 20, 2023, or such earlier date as MeridianCode may acknowledge in its responsive correspondence. VMS is prepared to work cooperatively with MeridianCode to confirm the operative date.

VMS acknowledges that Section 9.4 of the MESLSA provides that Dormancy Status may not exceed twelve (12) consecutive months before triggering the mandatory renegotiation or termination provisions set forth in Section 9.4(c) of the Agreement. VMS acknowledges this provision, understands its implications, and expressly reserves all of its rights thereunder, including the right to reactivate the license prior to the expiration of the twelve-month dormancy period.

5. Effect of Dormancy Status: Support Level Reduction

Pursuant to Section 9.4(a) of the MESLSA, upon the conversion of the license to Dormancy Status, MeridianCode's maintenance and support obligations are reduced from the full Tier 1 maintenance and support level (as described in Exhibit D to the MESLSA) to a critical-security-patch-only level. VMS understands and acknowledges that this reduced support scope means that, during the dormancy period, MeridianCode will have no obligation to provide general bug fixes, feature enhancements, compatibility updates, or dedicated technical support personnel. MeridianCode's sole support obligation during Dormancy Status will be limited to the identification, development, and delivery of patches addressing critical security vulnerabilities in the ATLAS-RT™ Licensed Software, including Version 4.2 and any updates thereto, including Version 4.2.3.

VMS expects MeridianCode to continue providing critical security patches throughout the duration of the dormancy period in a timely manner consistent with MeridianCode's standard security-response protocols and any applicable industry standards for embedded real-time operating systems deployed in automotive and fleet-vehicle applications. VMS reserves the right to raise any concerns regarding the timeliness or adequacy of critical security patches during the dormancy period through the dispute resolution procedures set forth in the Agreement.

6. VMS Position on Tolling of Milestone Deadlines

Section 9.4(b) of the MESLSA further provides that the invocation of Dormancy Status tolls all milestone deadlines tied to the licensee's integration progress for the duration of the dormancy period. VMS takes the position that this tolling provision is broad in its application and operates to suspend all contractual deadlines tied to integration progress, including but not limited to the following:

(a) The remaining integration services milestones under Statement of Work No. 1, specifically Milestones 4 and 5, including all associated acceptance testing deadlines, deliverable due dates, and payment triggers. VMS's position is that the deadlines for these milestones are tolled for the full duration of the dormancy period and will recommence only upon reactivation of the license from Dormancy Status.

(b) The deadline set forth in Section 4.3 of the MESLSA (commonly referred to by the parties as the "Use-It-or-Lose-It" clause). Section 4.3 requires VMS to commence integration testing on at least two (2) Platform Configurations within eighteen (18) months of the Effective Date — that is, by December 21, 2023. VMS has commenced integration testing on one Platform Configuration (Argonaut-A, which passed alpha integration testing on February 28, 2023). Integration testing on the second Platform Configuration (Argonaut-C) had not commenced at the time of suspension, as Argonaut-C was at Milestone 2 (source-code customization delivered, but integration testing not yet initiated).

VMS contends that the invocation of Dormancy Status tolls the Section 4.3 deadline for the full duration of the dormancy period. VMS's position is that, upon reactivation from Dormancy Status, the eighteen-month period specified in Section 4.3 will resume from the point at which it was tolled, with the remaining time running from the date of reactivation. VMS expressly reserves all rights, arguments, and defenses with respect to the application and interpretation of Section 4.3, including the right to argue that VMS has already satisfied the Section 4.3 requirement by virtue of the Argonaut-A alpha integration testing completed on February 28, 2023, and the Argonaut-C source-code customization accepted on January 15, 2023. VMS does not waive any such arguments by invoking Dormancy Status.

7. VMS Position on Fee Obligations During Dormancy

VMS acknowledges that MeridianCode issued Invoice No. MCT-2023-07-001, dated July 1, 2023, for the Year 2 Annual Maintenance & Support Fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000), with payment terms of Net 30 (due date: July 31, 2023).

VMS disputes its obligation to pay the full Year 2 Annual Maintenance & Support Fee during the dormancy period. VMS's position is grounded in the following reasoning: Section 9.4(a) of the MESLSA expressly reduces MeridianCode's support obligations during Dormancy Status to critical-security-patch-only level, which represents a material and substantial reduction from the full Tier 1 maintenance and support scope for which the annual fee of $2,400,000 was negotiated. VMS contends that, as a matter of contract interpretation and fundamental fairness, the annual maintenance fee must be abated or prorated to reflect the substantially reduced scope of support that MeridianCode is obligated to provide during the dormancy period. It would be commercially unreasonable for VMS to pay the full annual fee for services that MeridianCode is contractually excused from providing.

Accordingly, VMS reserves all rights with respect to the Year 2 Annual Maintenance & Support Fee and will not make payment of the invoiced amount of $2,400,000 pending resolution of this dispute. VMS is prepared to engage in good-faith discussions with MeridianCode regarding an appropriate fee abatement or proration methodology that reflects the reduced support scope during Dormancy Status. Should MeridianCode decline to engage in such discussions, VMS reserves the right to pursue all available remedies, including initiation of the dispute resolution procedures set forth in Section 15.9 of the MESLSA.

VMS further notes, for completeness, that no runtime royalties have been incurred under the MESLSA as of the date of this letter. The runtime royalty provisions of Section 5.3 apply only upon the commercial shipment of units incorporating the Licensed Software, and no such units have been shipped. The amount of runtime royalties owed to MeridianCode as of the date of this letter is zero dollars ($0). Additionally, the integration services fees for Milestones 4 and 5, totaling $1,280,000, have not been earned by MeridianCode, as those milestones have not been commenced, and no deliverables associated with those milestones have been submitted to or accepted by VMS.

8. Reservation of Rights Regarding Derivative Works

VMS further reserves all of its rights under the MESLSA with respect to derivative works created by VMS engineering personnel during the course of the integration process. During the period of active integration from June 2022 through March 2023, VMS's engineers developed three proprietary software modules designated DW-001, DW-002, and DW-003 (collectively, the "VMS Derivative Modules"). The VMS Derivative Modules comprise approximately 47,000 lines of original source code written by VMS employees and were developed to enable the adaptation of the Licensed Software to VMS's proprietary vehicle platform architectures, communication protocols, and safety-critical system interfaces.

VMS's position is that the VMS Derivative Modules constitute VMS-originated works, conceived, authored, and reduced to practice by VMS personnel using VMS resources and equipment, and that ownership of these modules vests solely in VMS. VMS is aware that Section 7.2 of the MESLSA and the associated intellectual property ownership provisions set forth in Exhibit C contain certain provisions relating to the ownership of derivative works that incorporate or are based upon the Licensed Software. VMS reserves all of its rights to contest the applicability, scope, and interpretation of Section 7.2 and Exhibit C as they relate to the VMS Derivative Modules.

For the avoidance of doubt, VMS does not waive any rights, claims, arguments, or defenses regarding derivative works ownership by invoking Dormancy Status under this letter. The invocation of Dormancy Status is independent of, and shall have no bearing upon, the parties' respective positions regarding intellectual property ownership of the VMS Derivative Modules or any other derivative works.

9. General Reservation of Rights

VMS expressly reserves all rights, remedies, claims, and defenses available to it under the MESLSA, at law, and in equity. Without limiting the generality of the foregoing, VMS specifically reserves the following:

(a) All rights under Section 9.1 of the MESLSA (Termination for Convenience), including VMS's right to terminate the Agreement for convenience upon sixty (60) days' prior written notice, subject to the termination fee provisions set forth therein;

(b) All rights under Section 9.4 of the MESLSA (Dormancy), including VMS's right to reactivate the license at any time during the dormancy period by providing written notice to MeridianCode, and VMS's right to extend, modify, or terminate Dormancy Status in accordance with the terms of the Agreement;

(c) All rights under Section 4.3 of the MESLSA (Use-It-or-Lose-It), including all tolling arguments set forth in Section 6 of this letter and any alternative arguments regarding satisfaction of the Section 4.3 requirements;

(d) All rights regarding fee recapture, credits, and offsets, including the right to seek a credit or refund of any portion of fees previously paid that may become attributable to services not rendered or license rights not utilized during the dormancy period;

(e) All rights under Section 12.6 of the MESLSA (Change of Control), including the right to invoke any protections or remedies available to VMS in the event of a change of control of MeridianCode during the dormancy period; and

(f) All other rights, remedies, and defenses of every kind and nature, whether arising under contract, statute, regulation, common law, or equity, and whether now known or hereafter arising.

Nothing in this letter shall be construed as a termination, cancellation, or rescission of the MESLSA, or as a waiver, release, or relinquishment of any of VMS's rights, remedies, claims, or defenses under the Agreement or otherwise. The invocation of Dormancy Status is a contractual right expressly provided for in the MESLSA, and VMS's exercise of that right shall not give rise to any inference of abandonment, forfeiture, or waiver.

10. Request for Acknowledgment

VMS requests that MeridianCode acknowledge receipt of this notice and confirm the effective date of Dormancy Status in writing within fifteen (15) business days of its receipt of this letter. MeridianCode's acknowledgment should confirm, at a minimum, the following: (i) receipt of this notice; (ii) MeridianCode's agreement as to the effective date of Dormancy Status; and (iii) MeridianCode's understanding of the reduced support scope applicable during the dormancy period.

All responsive correspondence should be directed to:

Martin G. Cross General Counsel Vantage Mobility Systems Corp. 4100 Industrial Parkway Sterling Heights, MI 48312

Email: mcross@vantagemobility.com

with a copy to:

Calderwood & Harkness LLP 600 Renaissance Center, Suite 3200 Detroit, MI 48243

Attention: Bernard Crawford, Esq.

Email: bcrawford@calderwoodharkness.com

11. Notice Provision Compliance

This letter is being delivered in compliance with the notice provisions set forth in Section 15.1 of the MESLSA, which requires that all notices, demands, and other communications under the Agreement be in writing and be delivered by overnight courier service or by electronic mail to the addresses specified in Section 15.1 or such other addresses as the parties may designate from time to time. This letter is being sent to MeridianCode at the following address, which is the notice address specified in the Agreement:

Meridian Code Technologies, Inc. 2750 Orchard Blvd., Suite 400 Santa Clara, CA 95054

Attention: General Counsel

A copy of this letter is also being transmitted by electronic mail to the email address on file for MeridianCode's General Counsel, consistent with the Agreement's provisions for electronic delivery.

We appreciate MeridianCode's anticipated cooperation in confirming Dormancy Status and look forward to MeridianCode's prompt written response. VMS remains committed to the commercial relationship between the parties and anticipates that the issues raised in this letter can be resolved through good-faith dialogue.

Very truly yours,

VANTAGE MOBILITY SYSTEMS CORP.

By: ________

Martin G. Cross General Counsel

Date: July 14, 2023

cc: Bernard Crawford, Esq., Calderwood & Harkness LLP cc: Conrad Ashby, Esq., Calderwood & Harkness LLP cc: Thomas R. Keating, Chief Executive Officer, Vantage Mobility Systems Corp. cc: Sandra M. Okafor, Chief Financial Officer, Vantage Mobility Systems Corp. cc: Dennis J. Whitfield, Chief Technology Officer, Vantage Mobility Systems Corp. cc: Rachel A. Huang, Vice President, Procurement & Strategic Sourcing, Vantage Mobility Systems Corp.

Encl.: Copy of MESLSA signature page (for identification purposes)

Fee Category	Amount Paid	Notes
Upfront License Fee	$8,000,000	Paid June 21, 2022
Year 1 Annual Maintenance & Support Fee	$2,400,000	Paid July 15, 2022
Integration Services Fees (Milestones 1–3)	$1,920,000	Of $3,200,000 total integration services fee
Total Fees Paid to Date	$12,320,000

VANTAGE MOBILITY SYSTEMS CORP. 4100 Industrial Parkway Sterling Heights, MI 48312
Telephone: (586) 274-8800 Facsimile: (586) 274-8801
July 14, 2023
Via Overnight Courier and Email (delivery@meridiancode.com)
Ms. Priya Ramaswamy General Counsel & Corporate Secretary Meridian Code Technologies, Inc. 2750 Orchard Blvd., Suite 400 Santa Clara, CA 95054
Re: Formal Notice of Dormancy Under Section 9.4 of the Master Embedded Software License and Services Agreement, dated June 21, 2022, between Vantage Mobility Systems Corp. and Meridian Code Technologies, Inc.
Dear Ms. Ramaswamy:
I write in my capacity as General Counsel of Vantage Mobility Systems Corp. ("VMS" or "Vantage"), a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in Sterling Heights, Michigan. This letter constitutes formal written notice delivered pursuant to Section 9.4 of the Master Embedded Software License and Services Agreement (the "MESLSA" or the "Agreement"), dated as of June 21, 2022, by and between Vantage Mobility Systems Corp., as licensee, and Meridian Code Technologies, Inc. ("MeridianCode" or "MCT"), as licensor. The purpose of this letter is to invoke the dormancy provisions set forth in Section 9.4 of the Agreement and to place the license for the ATLAS-RT™ embedded real-time operating system, Version 4.2 (and subsequent minor updates thereto), in Dormancy Status, as that term is defined in the MESLSA. This letter is sent with the advice and counsel of our outside legal advisors at Calderwood & Harkness LLP, Detroit, Michigan, who have reviewed this correspondence and the applicable provisions of the Agreement in their entirety.
1. Background and Agreement Overview
As MeridianCode is aware, the MESLSA was executed by the parties and became effective as of June 21, 2022 (the "Effective Date"). Pursuant to the MESLSA, MeridianCode granted to VMS a perpetual license (subject to the initial five-year term ending June 20, 2027) to use, integrate, modify, and deploy the ATLAS-RT™ embedded real-time operating system, Version 4.2, and subsequent minor updates thereto, including without limitation Version 4.2.3 (collectively, the "Licensed Software"), on a worldwide basis. The total deal value of the MESLSA, inclusive of license fees, integration services fees, and annual maintenance and support fees over the initial term, is Twenty Million Dollars ($20,000,000).
The scope of the license permits VMS to integrate the Licensed Software into up to five (5) designated vehicle platform configurations under VMS's internal development program designated "Project Argonaut." The five originally designated platform configurations are as follows: Argonaut-A, Argonaut-B, Argonaut-C, Argonaut-D, and Argonaut-E (each, a "Platform Configuration" and, collectively, the "Platform Configurations"). The specific technical requirements, hardware specifications, and deployment parameters for each Platform Configuration are set forth in Exhibit B to the MESLSA and in the corresponding Statements of Work.
As further set forth in Section 15.8 of the MESLSA, the Agreement is governed by the laws of the State of Michigan, without regard to its conflict-of-laws principles. Disputes arising under or in connection with the Agreement are subject to binding arbitration under the rules of the Midwest Arbitration Institute, with the arbitral seat in Detroit, Michigan, as specified in Section 15.9 of the Agreement.
2. Rescoping of Project Argonaut
VMS hereby informs MeridianCode that, on March 14, 2023, the Board of Directors of Vantage Mobility Systems Corp. adopted a formal resolution (Board Resolution No. 2023-07) to rescope Project Argonaut. Pursuant to that resolution, the target vehicle platforms for Project Argonaut were reduced from five Platform Configurations (Argonaut-A through Argonaut-E) to two Platform Configurations (Argonaut-A and Argonaut-C only). The remaining three Platform Configurations — Argonaut-B, Argonaut-D, and Argonaut-E — have been removed from the active Project Argonaut scope, subject to potential future reinstatement at VMS's discretion.
The Board's rescoping decision was driven by several converging factors. First, VMS has experienced significant and continuing supply-chain delays in the procurement of specialized semiconductor components required for the embedded computing modules in the Argonaut-B, Argonaut-D, and Argonaut-E platforms. These delays, which are attributable to broader industry-wide constraints in the semiconductor supply chain, rendered the original Project Argonaut timeline infeasible for the affected platforms. Second, VMS's private equity sponsor, Kestrel Capital Partners, LP ("Ashgrove Equity Partners"), issued a portfolio-wide capital expenditure reduction directive in the first quarter of 2023, requiring all portfolio companies, including VMS, to reduce planned capital expenditures by a minimum of thirty percent (30%) for the remainder of fiscal year 2023 and into fiscal year 2024. The rescoping of Project Argonaut was a direct consequence of VMS's compliance with that directive.
Additionally, as part of a broader strategic review conducted at Ashgrove Equity Partners's direction, VMS made the decision to prioritize internal combustion engine ("ICE") platform fleet vehicles over electric vehicle ("EV") platforms in the near term. The Argonaut-B and Argonaut-E platforms were principally designed as EV-integrated platforms, and the decision to defer electrification integration to a future Phase II initiative (for which no firm date has been established) further supported the rescoping. VMS notes that this strategic prioritization is subject to change and does not represent a permanent abandonment of EV platform development.
As a direct consequence of the rescoping resolution and the factors described above, VMS suspended all active integration work on the ATLAS-RT™ Licensed Software as of March 22, 2023. Since that date, no further integration, testing, customization, or deployment activities have been undertaken by VMS or its engineering personnel with respect to the Licensed Software on any of the Platform Configurations.
3. Integration Status at Time of Suspension
At the time active integration work was suspended on March 22, 2023, the integration status of each of the five Platform Configurations was as follows:
(a) Argonaut-A: Milestone 3 of 5 completed. Alpha integration testing was passed on February 28, 2023. All deliverables through Milestone 3, including initial hardware-software interface validation and basic functional testing of the ATLAS-RT kernel on the Argonaut-A target hardware, had been accepted by VMS's engineering review board. This Platform Configuration was the most advanced of the five in terms of integration progress.
(b) Argonaut-B: Milestone 1 only completed. The requirements specification for the Argonaut-B platform integration was approved on October 3, 2022. No code integration had commenced, and no source-code customization had been initiated for this Platform Configuration as of the suspension date.
(c) Argonaut-C: Milestone 2 of 5 completed. Source-code customization specific to the Argonaut-C platform architecture was delivered by MeridianCode on January 15, 2023, and was accepted by VMS's engineering team. Integration testing had not yet commenced for this Platform Configuration.
(d) Argonaut-D: Not commenced. No work of any kind had been initiated on the Argonaut-D Platform Configuration as of the suspension date.
(e) Argonaut-E: Not commenced. No work of any kind had been initiated on the Argonaut-E Platform Configuration as of the suspension date.
VMS's internal engineering teams had invested approximately 14,200 person-hours across the Project Argonaut integration effort as of the suspension date. These hours represent a substantial investment of VMS's engineering resources and institutional knowledge.
With respect to fees paid to MeridianCode as of the date of this letter, the following amounts have been remitted:
The remaining integration services fees for Milestones 4 and 5 total $1,280,000, none of which has been earned or invoiced as of the date of this letter.
4. Invocation of Section 9.4 Dormancy Provisions
Section 9.4 of the MESLSA provides, in relevant part, that if the licensee suspends active integration of the Licensed Software for more than one hundred twenty (120) consecutive days without providing written notice to the licensor, the licensor may, at its election, convert the license to "Dormancy Status." Section 9.4 further provides that the licensee may, by timely written notice delivered prior to the expiration of the 120-day period, affirmatively elect to invoke Dormancy Status on its own initiative.
As set forth in Section 2 above, VMS suspended all active integration work on the Licensed Software on March 22, 2023. Accordingly, the 120-day consecutive suspension period prescribed by Section 9.4 will expire on July 20, 2023.
This letter is being delivered to MeridianCode on July 14, 2023 — six (6) calendar days prior to the expiration of the 120-day period. This letter therefore constitutes timely written notice of VMS's suspension of active integration and of VMS's affirmative election to invoke Dormancy Status under Section 9.4 of the MESLSA. VMS is not in default of the 120-day notice requirement, and this notice is fully compliant with the timing and procedural requirements of Section 9.4.
VMS requests that Dormancy Status take effect as of July 20, 2023, or such earlier date as MeridianCode may acknowledge in its responsive correspondence. VMS is prepared to work cooperatively with MeridianCode to confirm the operative date.
VMS acknowledges that Section 9.4 of the MESLSA provides that Dormancy Status may not exceed twelve (12) consecutive months before triggering the mandatory renegotiation or termination provisions set forth in Section 9.4(c) of the Agreement. VMS acknowledges this provision, understands its implications, and expressly reserves all of its rights thereunder, including the right to reactivate the license prior to the expiration of the twelve-month dormancy period.
5. Effect of Dormancy Status: Support Level Reduction
Pursuant to Section 9.4(a) of the MESLSA, upon the conversion of the license to Dormancy Status, MeridianCode's maintenance and support obligations are reduced from the full Tier 1 maintenance and support level (as described in Exhibit D to the MESLSA) to a critical-security-patch-only level. VMS understands and acknowledges that this reduced support scope means that, during the dormancy period, MeridianCode will have no obligation to provide general bug fixes, feature enhancements, compatibility updates, or dedicated technical support personnel. MeridianCode's sole support obligation during Dormancy Status will be limited to the identification, development, and delivery of patches addressing critical security vulnerabilities in the ATLAS-RT™ Licensed Software, including Version 4.2 and any updates thereto, including Version 4.2.3.
VMS expects MeridianCode to continue providing critical security patches throughout the duration of the dormancy period in a timely manner consistent with MeridianCode's standard security-response protocols and any applicable industry standards for embedded real-time operating systems deployed in automotive and fleet-vehicle applications. VMS reserves the right to raise any concerns regarding the timeliness or adequacy of critical security patches during the dormancy period through the dispute resolution procedures set forth in the Agreement.
6. VMS Position on Tolling of Milestone Deadlines
Section 9.4(b) of the MESLSA further provides that the invocation of Dormancy Status tolls all milestone deadlines tied to the licensee's integration progress for the duration of the dormancy period. VMS takes the position that this tolling provision is broad in its application and operates to suspend all contractual deadlines tied to integration progress, including but not limited to the following:
(a) The remaining integration services milestones under Statement of Work No. 1, specifically Milestones 4 and 5, including all associated acceptance testing deadlines, deliverable due dates, and payment triggers. VMS's position is that the deadlines for these milestones are tolled for the full duration of the dormancy period and will recommence only upon reactivation of the license from Dormancy Status.
(b) The deadline set forth in Section 4.3 of the MESLSA (commonly referred to by the parties as the "Use-It-or-Lose-It" clause). Section 4.3 requires VMS to commence integration testing on at least two (2) Platform Configurations within eighteen (18) months of the Effective Date — that is, by December 21, 2023. VMS has commenced integration testing on one Platform Configuration (Argonaut-A, which passed alpha integration testing on February 28, 2023). Integration testing on the second Platform Configuration (Argonaut-C) had not commenced at the time of suspension, as Argonaut-C was at Milestone 2 (source-code customization delivered, but integration testing not yet initiated).
VMS contends that the invocation of Dormancy Status tolls the Section 4.3 deadline for the full duration of the dormancy period. VMS's position is that, upon reactivation from Dormancy Status, the eighteen-month period specified in Section 4.3 will resume from the point at which it was tolled, with the remaining time running from the date of reactivation. VMS expressly reserves all rights, arguments, and defenses with respect to the application and interpretation of Section 4.3, including the right to argue that VMS has already satisfied the Section 4.3 requirement by virtue of the Argonaut-A alpha integration testing completed on February 28, 2023, and the Argonaut-C source-code customization accepted on January 15, 2023. VMS does not waive any such arguments by invoking Dormancy Status.
7. VMS Position on Fee Obligations During Dormancy
VMS acknowledges that MeridianCode issued Invoice No. MCT-2023-07-001, dated July 1, 2023, for the Year 2 Annual Maintenance & Support Fee in the amount of Two Million Four Hundred Thousand Dollars ($2,400,000), with payment terms of Net 30 (due date: July 31, 2023).
VMS disputes its obligation to pay the full Year 2 Annual Maintenance & Support Fee during the dormancy period. VMS's position is grounded in the following reasoning: Section 9.4(a) of the MESLSA expressly reduces MeridianCode's support obligations during Dormancy Status to critical-security-patch-only level, which represents a material and substantial reduction from the full Tier 1 maintenance and support scope for which the annual fee of $2,400,000 was negotiated. VMS contends that, as a matter of contract interpretation and fundamental fairness, the annual maintenance fee must be abated or prorated to reflect the substantially reduced scope of support that MeridianCode is obligated to provide during the dormancy period. It would be commercially unreasonable for VMS to pay the full annual fee for services that MeridianCode is contractually excused from providing.
Accordingly, VMS reserves all rights with respect to the Year 2 Annual Maintenance & Support Fee and will not make payment of the invoiced amount of $2,400,000 pending resolution of this dispute. VMS is prepared to engage in good-faith discussions with MeridianCode regarding an appropriate fee abatement or proration methodology that reflects the reduced support scope during Dormancy Status. Should MeridianCode decline to engage in such discussions, VMS reserves the right to pursue all available remedies, including initiation of the dispute resolution procedures set forth in Section 15.9 of the MESLSA.
VMS further notes, for completeness, that no runtime royalties have been incurred under the MESLSA as of the date of this letter. The runtime royalty provisions of Section 5.3 apply only upon the commercial shipment of units incorporating the Licensed Software, and no such units have been shipped. The amount of runtime royalties owed to MeridianCode as of the date of this letter is zero dollars ($0). Additionally, the integration services fees for Milestones 4 and 5, totaling $1,280,000, have not been earned by MeridianCode, as those milestones have not been commenced, and no deliverables associated with those milestones have been submitted to or accepted by VMS.
8. Reservation of Rights Regarding Derivative Works
VMS further reserves all of its rights under the MESLSA with respect to derivative works created by VMS engineering personnel during the course of the integration process. During the period of active integration from June 2022 through March 2023, VMS's engineers developed three proprietary software modules designated DW-001, DW-002, and DW-003 (collectively, the "VMS Derivative Modules"). The VMS Derivative Modules comprise approximately 47,000 lines of original source code written by VMS employees and were developed to enable the adaptation of the Licensed Software to VMS's proprietary vehicle platform architectures, communication protocols, and safety-critical system interfaces.
VMS's position is that the VMS Derivative Modules constitute VMS-originated works, conceived, authored, and reduced to practice by VMS personnel using VMS resources and equipment, and that ownership of these modules vests solely in VMS. VMS is aware that Section 7.2 of the MESLSA and the associated intellectual property ownership provisions set forth in Exhibit C contain certain provisions relating to the ownership of derivative works that incorporate or are based upon the Licensed Software. VMS reserves all of its rights to contest the applicability, scope, and interpretation of Section 7.2 and Exhibit C as they relate to the VMS Derivative Modules.
For the avoidance of doubt, VMS does not waive any rights, claims, arguments, or defenses regarding derivative works ownership by invoking Dormancy Status under this letter. The invocation of Dormancy Status is independent of, and shall have no bearing upon, the parties' respective positions regarding intellectual property ownership of the VMS Derivative Modules or any other derivative works.
9. General Reservation of Rights
VMS expressly reserves all rights, remedies, claims, and defenses available to it under the MESLSA, at law, and in equity. Without limiting the generality of the foregoing, VMS specifically reserves the following:
(a) All rights under Section 9.1 of the MESLSA (Termination for Convenience), including VMS's right to terminate the Agreement for convenience upon sixty (60) days' prior written notice, subject to the termination fee provisions set forth therein;
(b) All rights under Section 9.4 of the MESLSA (Dormancy), including VMS's right to reactivate the license at any time during the dormancy period by providing written notice to MeridianCode, and VMS's right to extend, modify, or terminate Dormancy Status in accordance with the terms of the Agreement;
(c) All rights under Section 4.3 of the MESLSA (Use-It-or-Lose-It), including all tolling arguments set forth in Section 6 of this letter and any alternative arguments regarding satisfaction of the Section 4.3 requirements;
(d) All rights regarding fee recapture, credits, and offsets, including the right to seek a credit or refund of any portion of fees previously paid that may become attributable to services not rendered or license rights not utilized during the dormancy period;
(e) All rights under Section 12.6 of the MESLSA (Change of Control), including the right to invoke any protections or remedies available to VMS in the event of a change of control of MeridianCode during the dormancy period; and
(f) All other rights, remedies, and defenses of every kind and nature, whether arising under contract, statute, regulation, common law, or equity, and whether now known or hereafter arising.
Nothing in this letter shall be construed as a termination, cancellation, or rescission of the MESLSA, or as a waiver, release, or relinquishment of any of VMS's rights, remedies, claims, or defenses under the Agreement or otherwise. The invocation of Dormancy Status is a contractual right expressly provided for in the MESLSA, and VMS's exercise of that right shall not give rise to any inference of abandonment, forfeiture, or waiver.
10. Request for Acknowledgment
VMS requests that MeridianCode acknowledge receipt of this notice and confirm the effective date of Dormancy Status in writing within fifteen (15) business days of its receipt of this letter. MeridianCode's acknowledgment should confirm, at a minimum, the following: (i) receipt of this notice; (ii) MeridianCode's agreement as to the effective date of Dormancy Status; and (iii) MeridianCode's understanding of the reduced support scope applicable during the dormancy period.
All responsive correspondence should be directed to:
Martin G. Cross General Counsel Vantage Mobility Systems Corp. 4100 Industrial Parkway Sterling Heights, MI 48312
Email: mcross@vantagemobility.com
with a copy to:
Calderwood & Harkness LLP 600 Renaissance Center, Suite 3200 Detroit, MI 48243
Attention: Bernard Crawford, Esq.
Email: bcrawford@calderwoodharkness.com
11. Notice Provision Compliance
This letter is being delivered in compliance with the notice provisions set forth in Section 15.1 of the MESLSA, which requires that all notices, demands, and other communications under the Agreement be in writing and be delivered by overnight courier service or by electronic mail to the addresses specified in Section 15.1 or such other addresses as the parties may designate from time to time. This letter is being sent to MeridianCode at the following address, which is the notice address specified in the Agreement:
Meridian Code Technologies, Inc. 2750 Orchard Blvd., Suite 400 Santa Clara, CA 95054
Attention: General Counsel
A copy of this letter is also being transmitted by electronic mail to the email address on file for MeridianCode's General Counsel, consistent with the Agreement's provisions for electronic delivery.
We appreciate MeridianCode's anticipated cooperation in confirming Dormancy Status and look forward to MeridianCode's prompt written response. VMS remains committed to the commercial relationship between the parties and anticipates that the issues raised in this letter can be resolved through good-faith dialogue.
Very truly yours,
VANTAGE MOBILITY SYSTEMS CORP.
By: ________
Martin G. Cross General Counsel
Date: July 14, 2023
cc: Bernard Crawford, Esq., Calderwood & Harkness LLP cc: Conrad Ashby, Esq., Calderwood & Harkness LLP cc: Thomas R. Keating, Chief Executive Officer, Vantage Mobility Systems Corp. cc: Sandra M. Okafor, Chief Financial Officer, Vantage Mobility Systems Corp. cc: Dennis J. Whitfield, Chief Technology Officer, Vantage Mobility Systems Corp. cc: Rachel A. Huang, Vice President, Procurement & Strategic Sourcing, Vantage Mobility Systems Corp.
Encl.: Copy of MESLSA signature page (for identification purposes)
Fee Category | Amount Paid | Notes
Upfront License Fee | $8,000,000 | Paid June 21, 2022
Year 1 Annual Maintenance & Support Fee | $2,400,000 | Paid July 15, 2022
Integration Services Fees (Milestones 1–3) | $1,920,000 | Of $3,200,000 total integration services fee
Total Fees Paid to Date | $12,320,000

VANTAGE MOBILITY SYSTEMS CORP. 4100 Industrial Parkway Sterling Heights, MI 48312

VANTAGE MOBILITY SYSTEMS CORP.

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